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Much of the data that could not be released during the furlough could be construed as out of date by this point; however the non-farm payrolls will still be watched closely when announced tomorrow, expected to go up by 180,000 in September. This figure is still viewed as the key metric when it comes assessing the tapering of quantitative easing (QE) by the US Federal Reserve.
The consensus now sees the current $85 billion per month to continue until at least March of next year, when Janet Yellen will be properly ensconced in her new position as chairwoman of the Fed. This should be bullish for equities and negative for the dollar which has been pushed below the 80.00/20 level over the past number of days – an area that should provide a degree of resistance in the near term.
Dollar proves to be weak
The EUR/USD pairing has found this year’s high, 1.3710, a bit too much, and the recent sell-off can mostly be attributed to profit-taking. The dollar weakness is likely to continue, particularly since any long-term refinancing operation plans by the European Central Bank will be on hold until after the European bank stress tests.
Despite the weakness in the dollar, the gold price failed to capitalise. Any break above the $1325 level should be viewed as positive and could see the $1400 level targeted. A push back through $1270 and then $1250 sees the $1180 (lows of this year) as a likely magnet.
The S&P 500 has hit yet another all-time high, but is 5.17% above its 125-day average. This is further above the average than has been typical during the last two years, and rapid increases like this often indicate extreme greed. As discussed by Chris Weston this morning, the American Association of Individual Investors is showing its highest reading since July and makes the case for a correction.
High hopes for UK GDP
Closer to home, the FTSE 100 needs to see a close above the 6660/70 level if it is to re-target the highs of earlier this year. 6540 is the key area of support and we can probably expect to see the index trade within this range unless the overhead resistance is taken out.
UK GDP is likely to impress this Friday. Manufacturing and construction have (for the most part) beaten expectations and, even with September as the outlier, the effect on the overall economy is expected to be positive. A 0.8% rise is expected this Friday – higher than the 0.7% recorded in the previous quarter. We can expect the pound to benefit, particularly against the dollar. Any pull backs should be constrained to 1.5950, but a rise through 1.6150/60 does set a course for the 1.63.
UK earnings to watch
GlaxoSmithKline had some poor press with respect to bribery allegations in China, however this is not expected to impact revenues too much given the low exposure there. A 1.8% rise in revenue to £6.645bn in Q3 is expected.
Debenhams’s trading update in September was met well by investors. Pre-tax profit of £153m is expected (lower than the $158 seen last year). The outlook from the company will be the most important aspect here in light of the profits warning last year.
WPP Q3 results are out, while its rivals are planning a merger that will put the advertising and marketing company into second place in terms of size. WPP is something of a barometer for the global economy and its recovery revenues on the quarter are expected to rise by 4%.